Should You Borrow from Friends or Family for Investment Properties?

Borrow MoneyBorrowing from friends and family is typically frowned upon. The fear that the deal could go bad and you could lose the friendship or cause a family feud of epic proportions is not totally unfounded. There are good reasons to avoid borrowing from people whose relationships you value. Here are a few things to think about as you consider treating your friends or family as direct lenders.

Can You Write a Contract Together?

One important step is to come up with a contract. Will you repay the money no matter what happens if friends or family offer an investment loan? Or will everyone take on the same level of risk? It’s hard to say to someone who you trust, and who trusts you, that you think a written contract is necessary. Just this step can stop a deal in its tracks and damage a relationship.

Slow Fund Movement

The great thing about most investment property loans from private lenders and investors is that you can get the cash relatively fast. And with fast funding, you can ensure that you get the investment property that you want. Borrowing money from friends or family will take more time and you won’t feel good about pressuring them to hurry up and send the money over.

Balance Real Risk Against Real Benefits

If you’re borrowing from a hard money lender, you can get approved based solely on assets, primarily the investment property you need the loan for. Is it worth it to risk a personal relationship when you can get more benefits from a professional relationship with a private lender?

People do strange things when it comes to money. Some friends make terrible business partners, even if they are the best of friends. Weigh your options and consider what an investor loan is worth to you. And you won’t know what kind of financial savvy friends or family have until you’re deep into the deal. Many people talk the talk, but then turn out to have no idea how to walk to walk. Working with professional private money lenders gives you the benefits of a quick and asset based deal, without risking friendships and a family falling-out.

If you are considering a property rehab project and need funding, Center Street Lending can make it happen. They lend in CA, AZ, CO, UT, TX, FL & NC, up to 80% of the property purchase price as well as 80% of your anticipated rehab costs. Give them a call today at 949.244.1090, or request a no-obligation quote online. They use a simple, streamlined process, and can fund your project in as little as 24-hours!


FixFlip.com communications are not intended to provide business, legal, tax, investment or insurance advice.  No FixFlip communication should be construed as a recommendation for any business or investment strategy by FixFlip.com or any third party.  You are solely responsible for determining whether any investment, investment strategy, business strategy or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your legal or tax professional regarding your specific situation.

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